Regulatory Alerts2019-10-16
Swaziland Automated Electronic Clearing House Rules and Regulations
The Central Bank of Swaziland, acting through the Swaziland Bankers Technical Committee, issued these rules to establish and govern the Swaziland Automated Electronic Clearing House (SAECH). The regulations mandate standardized electronic clearing and settlement of EMALANGENI payment instruments among member banks, detailing membership criteria, operational procedures, data file standards, and liability limits. A designated Bankers Committee oversees compliance and resolves disputes through binding arbitration, while strict clearing schedules and penalty mechanisms ensure timely inter-bank settlements.
SWAZILAND
AUTOMATED
ELECTRONIC
CLEARING
HOUSE
RULES
&
REGULATIONS
REVISED APRIL 2011
TABLE OF CONTENTS
PAGES
Preamble................................................................................................................ 3 Terminology............................................................................................................ 3 1.0 Introduction...................................................................................................... 3 2.0 Parties to the rules........................................................................................... 3-4 3.0 Confidentiality.................................................................................................. 4 4.0 Establishment of a Swaziland Automated Electronic Clearing House.......... 4 5.0 Objectives of the SAECH................................................................................ 4 6.0 Operational Structure of the SAECH.............................................................. 5 7.0 Governing Body............................................................................................... 5-7 8.0 Clearing House Membership........................................................................... 7 9.0 SAECH Management....................................................................................... 7 10.0 Clearing System............................................................................................. 7-8 11.0 The Electronic Clearing-House...................................................................... 9-12 12.0 Exchange of Electronic Data and Related Cheques...................................... 12-13 13.0 Presentation of Instruments........................................................................... 13-14 14.0 Wrongly Cleared Items Received................................................................... 15 15.0 Electronic Funds Transfers............................................................................ 15-16 16.0 Unpaid /Unapplied Instruments (Cheques)................................................... 17-18 17.0 Postdated Instruments.................................................................................... 18 18.0 Carrier Envelopes........................................................................................... 18-19 19.0 Missing Instruments....................................................................................... 19-20 20.0 Bank Stamps.................................................................................................. 20 21.0 Liability for Losses......................................................................................... 21-22 22.0 Limit of Liability.............................................................................................. 22 23.0 Dispute Resolution......................................................................................... 22 24.0 General Provisions......................................................................................... 22 25.0 Governing Law............................................................................................... 23 Appendices i) A - Transaction Codes....................................................................................... 24-25 ii) B - Definitions.................................................................................................... 26-29 iii) C - Reasons to Dishonor Payment Instruments............................................... 30-31 iv) Signature Page.................................................................................................. 32
CLEARING HOUSE RULES AND REGULATIONS
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Preamble
The Rules and Procedures of the Swaziland Automated Electronic Clearing House (SAECH) play a critical role in enabling the participants in the clearing system to understand the operations and functionalities of the SAECH system. Thus this document is intended to provide clarity and guidance regarding the rights and obligations of each participant. The document also clearly outlines the roles of the participants and the system operator as well as the procedures that are to be followed in various circumstances. In particular, the document outlines the SAECH agreements/standard/procedures as well as specifies the SAECH system requirements. Issues such as security, transportation delays, and contingency are also covered in this document.
While the primary responsibility for producing clear, timely and readily understandable rules, regulations and procedures rests with the operator, the primary responsibility for reading and understanding this document rests with the participants.
Each and every participant in the clearing system shall be legally bound by these rules, regulations and procedures.
All members generating or accepting electronic data files on behalf of their customers, shall indemnify the SAECH and accept that the submitting / presenting bank maintain the responsibilities contained within these rules, regulations and procedures for the authenticity of the data contained in all electronic files submitted. That the submitting / presenting bank shall hold authorization together with all relevant mandates, customer instructions, and / or supporting documentation.
Terminology
Use of “Shall”, “Should”, “May” and “Must”
In accordance with International Standards Organization (ISO) practice, the word “shall” or “must” indicates a mandatory requirement, and “should” or “may” a preference.
1.0 INTRODUCTION
1.1 These Rules supersede all previous rules, which are hereby repealed. These Rules may be amended, or added to from time to time by the Swaziland Bankers Technical Committee comprising representatives from all member banks. 1.2 These Rules constitute the principal framework for the structure and operation of the clearing process in Swaziland. 1.3 These Rules shall come into operation on such a date as the Central Bank of Swaziland may, by issuance of a circular to all members of the SAECH..
2.0 PARTIES TO THE RULES
2.1 All clearing banks in Swaziland admitted to the SAECH in their own capacity or, as agents acting for other banks not in the SAECH are parties to the Rules. 2.2 Any new clearing bank wishing to participate in the SAECH, shall abide by the Rules and Regulations as outlined in this document. 2.3 The Central Bank of Swaziland as the regulatory body, and overseer but not the operator of the SAECH shall not be liable for any losses incurred by a member(s), arising out of the operation of the SAECH. The Central Bank of Swaziland shall, however, remain accountable pursuant to the terms of these rules, for its own items, in the same manner as other members.
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The SAECH shall be located at the Standard Bank premises in Matsapha and shall remain there until such time as may otherwise be agreed by the members and SAECH management.
3.0 CONFIDENTIALITY
The arrangements which, follow, are confidential as between the member banks and are designed for the benefit of the banking industry alone. Any provisions, which relate to liability for losses arising within the banking industry, do not extend to bank customers or other third parties.
4.0 ESTABLISHMENT OF SWAZILAND AUTOMATED ELECTRONIC CLEARING HOUSE
There shall be established, in Swaziland, an “Electronic Clearing House, which shall be called the Swaziland Automated Electronic Clearing House (hereinafter “the SAECH”) which shall at all times operate under proper License, regulation and supervision of the Central Bank of Swaziland Order and Financial Institutions (Consolidation) Order. The Rules in this document apply to inter-bank EMALANGENI transactions within Swaziland conducted via the Swaziland Automated Electronic Clearing House.
5.0 OBJECTIVES OF THE SAECH
5.1 The objectives of the SAECH are
5.1.1 To facilitate, and provide Automated Electronic Clearing House services to member banks at one central clearing house in Swaziland.
5.1.2 To make arrangement for the speedy and economic collection of cheques, bills and other documents payable or deliverable at or through the offices of any member, primarily via magnetic media or communications networks.
5.1.3 To maintain all transactions records of the SAECH and such other related matters as may be thought necessary.
5.1.4 To provide and facilitate for the secure, accurate and efficient exchange and settlement of payment instructions of members.
5.1.5 To provide efficient storage and retrieval of information, for the purposes of investigation, resolution of queries and reporting.
5.1.6 To do all such other lawful things as are incidental or conducive to the attainment of all or any of the forgoing objectives.
6.0 OPERATIONAL STRUCTURE OF THE SAECH
6.1 The SAECH management shall at all times maintain suitably qualified staff that will efficiently run and operate the day to day clearing process.
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7.0 GOVERNING BODY
7.1 There shall be a recognized governing body known as the Bankers Committee, consisting of the Governor, Central Bank of Swaziland (who shall be its ex-officio Chairman) Managing Directors of Standard Bank (Swaziland) Limited, Swaziland Development and Savings Bank (Swaziland), First National Bank (Swaziland) Limited, and Nedbank (Swaziland) Limited. The Managing Director of any other bank admitted to the Clearing House under 8.0 shall automatically become a member.
7.2 The powers of the governing body shall be as follows:
7.2.1 To ensure that the objectives of the SAECH are met.
7.2.2 To ensure and control the efficient and continued operation of the SAECH.
7.2.3 To recommend to the Central Bank of Swaziland the suspension or expulsion from the clearinghouse of a member that does not maintain or meet any or all of the clearinghouse membership conditions.
7.2.4 To ensure that at all times the SAECH operations are in compliance with these Rules and any other relevant laws.
7.2.5 To assume any ancillary powers relating to the forgoing powers.
7.2.6 ARBITRATION
7.2.6.1 The Governing Body shall be responsible for settlement of grievances and disputes arising from these Rules and the following procedures shall apply: 7.2.6.2 Any Bank involved in a dispute with another, which cannot be settled by mutual agreement at Administration Officer level, shall submit the relevant dispute to the Governing Body (GB) for resolution; 7.2.6.3 Before submitting the dispute to the GB, all parties shall have agreed in writing to accept the GB's decision as binding; and the GB shall, after having obtained factual evidence from all parties concerned and after having considered all facts in the light of the Rules, deliver such decision within fourteen (14) business days.
7.3 A meeting of the governing body may be called by the Chairman, at any time or on written request of two members to consider any urgent specified business.
7.4 The decision making process of the governing body shall follow the usual procedure adopted in the meetings held by the Bankers Committee in their day to day meetings.
8.0 CLEARING HOUSE MEMBERSHIP
8.1 Any bank licensed hereafter under the Financial Institutions (Consolidated) Order 1975 as amended or established under a special law, can become a member of the SAECH by applying to the governing body. In determining an application the governing body shall take into account the following: 8.1.1 Only clearing banks having settlement accounts with the Central Bank of Swaziland may engage in clearing and settlement operations.
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8.1.2 Other financial institutions may only participate in the clearing and settlement system through an agency arrangement with a clearing bank(s). 8.1.3 The membership of the SAECH shall be limited to only those clearing banks that maintain sufficient liquidity levels and apply acceptable risk management policies. 8.1.4 Ownership of the SAECH will rest with the appointed SAECH board. The owner, however, must abide by the rules and regulations that are set by the regulatory body(s) and adhere to agreed service level agreements.
8.2 Membership suspension
8.2.1 Suspension of a Membership shall apply: 8.2.1.1 If the member is granted moratorium or prohibited from accepting fresh deposits; 8.2.1.2 If the member fails to meet their day’s clearing and settlement obligations due to insufficient or lack of funds after full participation in the clearing and settlement process; 8.2.1.3 If a member is placed under statutory management in accordance with the provisions of the Financial Institutions Ordinance (FIO); 8.2.1.4 If a member fails to attend two (2) consecutive working days clearing and settlement sessions without providing a valid or supportable reason and failing to notify the SAECH Supervisor; 8.2.1.5 If, in the opinion of the SAECH Management Committee, a member has not acted in the highest principles and interest of the clearing and settlement process; 8.2.1.6 If the member stops or suspends payment of its debt generally or ceases to carry on business or goes into liquidation either voluntarily or compulsorily; 8.2.1.7 If the member is known to have participated in any proven fraudulent activities relating to the business conducted within or through the SAECH; and 8.2.1.8 If the member does not abide by any decisions of the SAECH Governing Body in the case of arbitration of any dispute.
8.2.2 Procedures to be adopted for the suspension of membership shall be follows: 8.2.2.1 In all matters concerning voluntary withdrawal such withdrawal shall first be referred to the governing body for evaluation and their recommendation shall then be communicated to the Central Bank of Swaziland within 5 working days for approval. The affected bank shall be requested to present their case at the meeting of the governing body. 8.2.2.2 Voluntarily withdraws from the activities of the clearing and settlement procedures by giving a notice period of at least “thirty” (30) calendar days. 8.2.2.3 The Central Bank of Swaziland shall through the Governor inform all member banks to delete the sort codes for any bank that has ceased to be a member of the clearing and settlement service.
8.3 The following banks are at present members of the Swaziland Automated Electronic Clearing House: - 8.3.1 Swaziland Development and Savings Bank (Swaziland)
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8.3.2 Central Bank of Swaziland 8.3.3 Standard Bank (Swaziland) Limited 8.3.4 First National Bank of (Swaziland) Limited 8.3.5 Nedbank (Swaziland) Limited
8.4 All member banks shall exchange eligible items and or instruments through the “SAECH” as outlined in section 13.
9.0 SAECH MANAGEMENT
9.1 There shall be an Electronic Clearing House Management Committee comprising the Directors (Head of Operations) appointed by each member bank to SAECH. The SAECH Management Committee shall be charged with the overall responsibility for the promotion; achievement of the objectives of the SAECH by administering the activities of the clearing and also recommending changes to these Rules and Regulations of the SAECH to the Governing Body through the Swaziland Bankers Technical Committee.
9.2 The SAECH Management Committee members shall be presided over by a chairman, who shall be the representative of the Central Bank of Swaziland.
9.3 The chairman shall provide a “secretary” who shall record the meetings proceedings, which shall be held at least bi-monthly, and minutes submitted to the SAECH Management Committee members.
9.4 Voting shall be by “simple majority” with the chairman having a casting vote.
9.5 A bank shall cease to be a member of the committee if it ceases to be a member of the SAECH.
9.6 A special meeting of the committee may be called by the Chairman at any time, or by any member, on application to the Chairman, in writing, specifying the business to be conducted; and
9.7 Two members in addition to chairman shall form a quorum.
10.0 CLEARING SYSTEM
10.1 The clearing system is designed to ensure that items drawn on a bank and Presented at another are cleared so that the appropriate accounts credited are paid or debited to the respective banks. Instead of bank officials moving from bank to bank with claims and counterclaims on behalf of customers, the system has been designed to enable bank officials from different banks to meet under one-roof and exchange items, with payments being made electronically on a net settlement basis through the banks' reserve accounts with the Central Bank of Swaziland. 10.2 A collecting bank may receive instruments from its customer, to collect the proceeds and credit the customer’s account. 10.3 In the collection of cheques, a collecting bank will be expected to bring reasonable care and diligence in presenting the effects for payment.
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10.4 It is the duty of paying banks to honor their customers' payment instructions provided that: 10.4.1 The balances standing to the credit of their customers are sufficient to pay. 10.4.2 The payment instruments are properly drawn in the proper form.
10.4.2.1 Be signed by the drawer himself or on his authority. 10.4.2.2 Be due for payment i.e. not stale or post-dated. 10.4.2.3 Have the sum to be paid expressed in words, and figures, which must agree. 10.4.2.4 Purport to be properly endorsed, if an endorsement is required. 10.4.2.5 Comply with any other similar requirements; 10.4.2.6 There is no legal bar prohibiting payment and or any other legally acceptable impediment, which may constitute the following: 10.4.2.6.1 Notice from the customer to stop payment. 10.4.2.6.2 Knowledge of any defect in the title of the person presenting the payment instrument. 10.4.2.6.3 Notice of the presentation of an insolvency position by or against its customer and, possibly in the case of third party payment instruments, notice of an available act of insolvency of the third party. 10.4.2.6.4 Notice of a customer's death or mental incapacity. 10.4.2.6.5 Knowledge that the customer contemplates a breach of trust in cases where it is known that funds credited to the account is trust funds. 10.4.2.6.6 Notice of a garnishee, injunction or other order restraining its customer from operating the account.
10.5 COMPONENTS OF SAECH STANDARDS
10.5.1 The operations of the SAECH are governed by a series of Rules and Regulations as well as standards, which are in three parts hereunder:
10.5.1.1 SAECH Rules The SAECH Rules provide details governing the exchange of EMALANGENI payments to be followed by clearing banks in Swaziland: 10.5.1.2 Standards for Debit Paper Instruments: These standards provide the requirements and specifications for the design of all cheques and all other debit instruments used for inter-bank payment exchange between local banks. They have been developed and agreed to facilitate the automation of the clearing processes of MICR encoded cheques and debit vouchers. Member banks shall ensure full compliance with the specifications and prescriptions laid down therein. 10.5.1.3 Transaction Codes Standards for Cheques and Debit Instruments: Transaction Codes for all cheques and all other debit vouchers used for inter-bank settlement exchanges, in local currency, between banks in Swaziland.
These standards are designed to facilitate the automation of the clearing processes of payments. The objectives of automating the clearing, is to improve the processing of inter-bank payments.
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11.0 THE ELECTRONIC CLEARING - HOUSE
11.1 Conduct Of Business And Supervision.
11.1.1 The business of the SAECH shall be accepted as the medium providing the requirements for exchange for presentation and settlement of payment instruments between members.
11.1.2 The business of the SAECH shall be conducted under the supervision of the SAECH Supervisor. The SAECH Supervisor shall be responsible for discipline in the SAECH.
11.1.3 The SAECH Supervisor shall be mandated and authorized to sign all Settlement Certificates for member banks where necessary.
11.2 General Procedure
11.2.1 A bank which transmits data files to the SECH, which are unreadable, corrupt, contain a virus or do not balance, will be given fifteen [15] minutes within which to rectify the condition and re-submit. Failure to submit correct data files within this deadline will result in that bank being “locked out” of that clearing. The bank in question shall be obliged to accept clearances data from other banks.
11.2.2 Any cheque or EFT record that contains a wrong account number shall incur a penalty of E25 (Twenty Five Emalangeni, only) per record and will be raised by the receiving bank for collection.
11.2.3 All receptacles containing instruments and diskettes for transportation to and from the SAECH shall be securely fastened and or locked.
11.2.4 All instruments that are exchanged at the SAECH shall bear a single clearing stamp of the collecting bank endorsed on the face of the instrument. Banks shall place processing endorsements on the reverse of the instrument.
11.2.5 Records that are contained in the Electronic Data Files shall be in the same order as the instruments batched in the receptacles for delivery to the SAECH including control vouchers.
11.2.6 A representative of each member bank shall remain in the clearing-house until he/she receives the permission of the SAECH Clearing Supervisor to leave.
11.2.5 Cleared items shall not be removed from the clearinghouse until the session has been declared to be “In Balance “by the SAECH Supervisor.
11.3 Clearing Time
11.3.1 There are two clearing session per day at 09:00 and 15:00 Hrs from Monday to Thursday. Friday clearing sessions are at 09:00 and 14:30 hrs. There shall be no processing of clearance transactions on Saturday, Sunday or Public Holidays. There shall be one Clearing Session on the eve (day preceding) of
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Easter and Christmas Holidays. This single Clearing Session shall be scheduled at 11:30 hours on the eve of these public holidays. The same rules and procedures as applicable to normal day clearing sessions shall apply also to this clearing session.
11.3.2 The electronic files must be at SAECH by 09:00 and 15:00 Hrs (14:30 Hrs Friday).
11.3.3 Clearing member banks should observe punctuality in the clearinghouse. Any bank representative who arrives in the clearing house after 09:15 or 15:15 Hrs Monday to Thursday and 14:45 Hrs on a Friday without a valid reason shall be excluded by the SAECH Clearing Supervisor from presenting his bank's clearings on that day, but shall accept instruments presented by other members against his bank as if he had attended, and a debit entry shall be charged against his bank accordingly.
11.3.4 Promptly at the times agreed upon, each member-clearing bank must be represented in the clearinghouse even if only to receive the claims presented by other members.
11.3.5 Representatives are expected to know their duties and the clearinghouse rules. It is not incumbent on, nor must it be expected of, the SAECH Clearing Supervisor or other member clearing bank representatives to render assistance to a non-compliant member.
11.4 Access To The Clearing House
11.4.1 Each member bank is to supply, directly to the SAECH Supervisor, specimen signatures of representatives who will be attending the clearing sessions.
11.4.2 Such instructions shall be signed by two authorized signatories of the member bank, and shall be updated whenever necessary.
11.4.3 Banks’ representatives shall present for identification purposes a letter of introduction and suitable identification, which can be verified by the supervisor as prescribed by the Clearing House the Clearing House.
11.5 Clearing Items – Transit Period
11.5.1 Instruments received by a member bank for clearing, will be considered, paid, if not received as unpaid via the SAECH or at the member banks’ collecting branch or advised unpaid by agreed means within TWO working days (Monday – Friday) from the date of lodgment at the SAECH.
Example Monday - Day 0 | Collecting bank receives cheque(s) from customer and lodges them through SAECH. Tuesday - Day 1 | Date of lodgment at SAECH if received from customer on day 0 after second clearing cut off time. Wednesday - Day 2 | Lodgement of unpaid items at SAECH and last day for returns and advice of unpaid items.
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Clearing Items – Value Dating
11.6.1 Debits to member banks’ accounts at the Central Bank of Swaziland will be assigned as same day’s value provided the payment instruction is received before 1500 Hrs (cut-off time).
11.7 Daily Timetable for SAECH Clearing and Settlement.
08:15 | SAECH staff report for duty. Monday – Friday. 14:15 | SAECH staff report for duty. Monday – Thursday. 13:45 | SAECH staff report for duty. Friday.
| Monday To Friday | PM clearing | ACTIVITY |
|---|---|---|
| 09:00 | SAECH opens for exchange. Monday – Friday. | |
| 15:00 | SAECH opens for exchange. Monday – Thursday. | |
| 14:30 | SAECH opens for exchange. Friday. | |
| 09:05 | SAECH sends opening balances to presenting member banks. | |
| 09:15 | All electronic data files to be with SAECH for processing and instruments to be physically exchanged between SAECH members. The SAECH receives & validates all files and sends validation reports back to all presenting banks. | |
| 09:30 | SAECH releases the Provisional Settlement Positions Data Files and Discrepancy Files to member banks. Banks then return to their respective clearing centers to read the Data Files and reconcile the paper instruments. | |
| 09:40 | SAECH makes available “Settlement Certificates” for all banks that have participated in the clearing and settlement. | |
| 09:50 | Net Settlement Position file passed to SWIPSS for settlement. | |
| 15:00 | 14:30 | SAECH opens for exchange |
| 15:05 | 14:35 | SAECH sends opening balances to presenting member banks |
| 15:15 | 14:45 | All electronic data files to be with SAECH for processing and instruments to be physically exchanged between SAECH members. The SAECH receives & validates all files and sends validation reports back to all presenting banks. |
| 15:30 | 15:00 | SAECH releases the Provisional Settlement Positions Data Files and Discrepancy Files to member banks. Banks then return to their respective clearing centers to read the Data Files and reconcile the paper instruments. |
| 15:40 | 15:10 | SAECH makes available “Settlement Certificates” for all banks that have participated in the clearing and settlement session. |
| 15:50 | 15:20 | Net Settlement Position file passed to SWIPSS for settlement. |
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The SAECH shall calculate the net settlement figures between banks and pass entries to their respective reserves accounts held at the Central Bank of Swaziland in the Swaziland Interbank Payment and Settlement system (SWIPSS) at the completion of each clearing session.
11.8 Failure to Settle
11.8.1 In an event that a participant fails to settle, collateral security shall immediately be called to settle the debt obligation. Moreover, such collateral shall be insulated from the effects of insolvency. 11.8.2 If the Central Bank of Swaziland considers that the making of a payment or transfer is likely to result in systemic risk, the Central Bank of Swaziland may, by written notice to the participants concerned: - 11.8.2 Prohibit the making of the payment or transfer, if it has not already been made; or 11.8.3 Set aside the payment or transfer if it has already been made, and shall forthwith, provides the participants with a written statement of its reasons for doing so. Provided that no such payment or transfer shall be set aside more than twenty-four hours after it has been made.
11.9 Fines and Penalties
11.9.1 Fines and penalties shall be appropriated with the intent of instilling discipline among members and levied as provided under Appendix “to be advised”.
11.10 High Value Clearing
11.10.1 Any cheque or paper based debit instrument having a face value of E1, 000,000 (One Million Emalangeni) or above shall not be forwarded to SAECH for clearing or form part of any electronic submission.
11.10.2 Should any cheque or other paper based debit be received by a bank for clearing having a face value of E1,000,000 (One Million Emalangeni) or above, the collecting bank shall make a special presentation to the paying bank, and if paid, the paying bank shall transfer the proceeds electronically through the SWIPSS to the collecting bank.
11.10.3 Whereas upper caps for Collections or Debit Electronic Funds transfers (Dr. EFTs) shall be Five Hundred Thousand Emalangeni only (E500, 000.00), upper caps for Payments or credit Electronic Funds Transfers (Cr. EFTs) shall stand at One Million Five hundred thousand Emalangeni only (E1, 500,000.00).
11.10.4 The Swaziland Automated Clearing House (SAECH) shall put in place parameters in the clearing processing system to ensure that all data files forwarded to SAECH for clearing do not contain items above cap limits, that is, all files containing items in excess of cap shall be excluded from the clearing process.
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12.0 EXCHANGE OF ELECTRONIC DATA AND RELATED CHEQUES
12.1 SAECH SYSTEM REQUIREMENTS 12.1.1 The SAECH will not process cheques for clearing banks; and 12.1.2 The SAECH will provide for the exchange of electronic data files and facilitate settlement.
12.2 Electronic Data Files
12.2.1 Electronic data files shall be transmitted to the SAECH on each clearing day from each bank for each clearing process. 12.2.2 All Electronic data files must be received by the SAECH from the banks in each transmission, but if there are no records then the file will consist of the Header and Trailer records only. The Electronic Journal files to be transmitted to the SAECH will consist of:
12.2.2.1 Cheques Electronic Data File
The cheques electronic data file, details all cheques being presented for exchange on that day, and unpaid. The Unpaid Section in the electronic data file details all cheque being returned on that day, and the contents of the Unpaid Record shall be the same as the original record with the only change being the inclusion of the reason for return code [see Appendix C herein].
12.2.2.2 Settlement Position File
A Settlement Position File shall be produced by the SAECH. It provides, to the Central Bank of Swaziland, totals of all the items to be exchanged between clearing banks. Nil returns shall be included. The totals in the Settlement Position File must equal the total of the records being exchanged in all the other electronic data files for that day. Differences shall be reported in the Discrepancy electronic data file.
12.2.2.3 Security File
The electronic data files shall also include a Security File containing the unique encrypted electronic signatures to enable the authentication of the data files to be verified. The specification, format and contents of such Security Files shall not be published.
13.0 PRESENTATION OF INSTRUMENTS
13.1 Items eligible for presentation through clearing:
The following financial instruments drawn on offices of the Banks in Swaziland may be cleared through the Clearing House: -
- Electronic Fund Transfers (EFTs)
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-
Cheques
-
Banks' Demand Drafts
-
Clearance Vouchers
-
Unpaid items
-
Authorized debit orders (provided that prior arrangements have been made amongst the banks concerned).
-
Debits raised by member banks in respect of commission or other charges, and such debits shall be subject to prior arrangements between the banks concerned.
13.2 Direct Presentation Treasury bills, bank notes and coupons may be presented direct at the counter at the Central Bank of Swaziland and not cleared through the Clearing House.
13.3 Special Presentation
13.3.1 A member bank, under special circumstances, may make special presentation of an instrument for payment within normal business hours, to the bank on which it is drawn accompanied by an appropriate form marked "Special Presentation." 13.3.2 The paying member bank in such a case shall advise either non-payment or make payment by clearance voucher within reasonable time but not later than sixty minutes after presentation, free of charge. The clearance voucher will then be presented for payment in the next session of the clearinghouse. 13.3.3 Payment made in respect of a "special presentation" shall be without recourse and subject to "no right of subsequent return". 13.3.4 Special presentations are to be governed by the following rules:
-
Items to bear the legible date stamp of the collecting member bank branch.
-
If the bank's date stamp is not legible, the paying bank shall reject the instrument.
-
If payment is refused, only a direct reply, written clearly on the item, is permissible.
13.4 Conditions to be fulfilled before Presentation
13.4.1 Collecting banks shall place all instruments and accompanying documents in sealed stamped envelopes signed by the Supervisor/Checking Clerk of the collecting bank. 13.4.2 The envelopes are to be sealed and signed in the presence of the clearing clerk, who shall be responsible for the exchange of the instruments at the SAECH. 13.4.3 The features of the envelopes should be strong and sealable. 13.4.4 The envelopes are to be carried in a receptacle that is lockable and will be inspected for any irregularities and received by the SAECH Supervisor.
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13.4.5 Where a bank has provided the Supervisor of the SAECH with keys or codes to open and lock the receptacle of the instruments exchanged the SAECH Supervisor will be responsible for opening and locking the receptacles on arrival or departure of the member bank representatives.
13.4.6 Any irregularities observed by the SAECH Supervisor in the inspection and receipt of both the receptacles and or envelopes, shall be accordingly recorded in the Occurrence Register and the operations manager of the paying bank must be advised.
13.4.7 Instruments requiring endorsement must be endorsed before being presented at the SAECH. And shall bear the clearing date-stamp of the presenting bank.
14.0 WRONGLY CLEARED/DELIVERED ITEMS RECEIVED
14.1 Banks shall, on a bilateral basis, immediately resolve problems resulting from:
14.1.1 A missing batch of vouchers 14.1.2 A wrongly included batch of vouchers
14.2 In all cases the receiving bank shall be responsible for advising the Supervisor of the SAECH in order to enable an assessment of the situation.
14.3 The receiving bank shall impress its bank stamp at the back of wrongly cleared instrument as proof that such instrument has passed through its books and the date thereof be regarded as day 0.
14.4 Wrongly cleared items are to be returned to the collecting bank under cover of unpaid advice.
14.5 The time limit for the return of wrongly cleared items shall be the same as that set in rule 11.5 for transit period.
14.6 The affected bank may claim interest where the value of the interest amount is E500 and above based on the prevailing CBS rate.
15.0 ELECTRONIC FUNDS TRANSFERS (EFT)
15.1 General Principles
15.1.1 The SAECH facilitates the transfer of funds between Clearing Centres electronically. The SAECH does not facilitate the exchange of debits or credits using paper vouchers. To make a transfer of funds to an account at another bank, the bank receiving the request from a customer shall generate an Electronic Funds Transfer record in the EFT file.
15.1.2 The bank originating an EFT shall be responsible for the accuracy and authenticity of the contents of the record contained in the EFT file. The bank receiving an EFT shall be responsible for the accurate implementation of the transaction contained in the record within the EFT file. The bank debiting a customer’s account shall hold the relevant mandate, instruction and supporting documentation to debit that account.
15.1.3 Credit payment information, shall be provided by the paying bank, such as to ensure that the funds shall be made available in the beneficiaries account at the opening of business on the settlement date.
15.1.4 Debit payments, shall be undertaken only when written authorization has been obtained by way of a mandate or other legally binding document to the payers bank that determines whether the payment is authorized by the payer.
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15.2 Mandates Required for EFT’s to Credit and / or Debit for an account at Another Bank.
15.2.1 The following details shall be present in all cases:-
the amount to be transferred (12 digits); details of the account being debited (i.e. Bank Code (2 digits), Branch Number (4 digits) and Account Number (13 digits which may be padded with preceding zeros)); details of the account to be credited (i.e. Bank Code, Branch Number and Account Number); the beneficiary’s name (up to 30 alpha-numeric characters); an originators reference (up to 15 alpha-numeric characters) which can be transcribed onto the statement for the customer’s account to be credited to identify the source of the credit; queries relating to the EFT should be addressed to the Bank and Branch accepting the instruction; and
15.2.2 The voucher type code that shall be used are reflected in Appendix “C”; and the Bank and Branch accepting the instruction shall satisfy themselves that the transfer of funds is not as a result of, or for criminal activities.
15.3 Payment of Taxes
15.3.1 The Bank generating the credit shall retain the tax payment form as evidence of the instruction. The details to be transcribed to the EFT record shall be:-
the amount to be transferred; details of the account being debited (i.e. the Bank Code, Branch Number and Account Number); details of the account to be credited (i.e. the Bank Code, Branch Number and Account Number); the beneficiary’s name (up to 30 alpha-numeric characters); the tax payment reference (up to 15 alpha-numeric characters) which may be transcribed onto the statement for the customer’s account to be debited to identify the destination of the funds. The tax payment reference is also used as a unique reference to retrieve the mandate; and Queries relating to the EFT should be addressed to the Bank and branch accepting the instruction to pay.
The transaction code shall be 75.
15.4 Unpaid, Unapplied and Disputed Transactions.
15.4.1 Unpaid and Unapplied EFT transactions shall be returned only through the SAECH.
15.5 Unapplied Electronic Transactions
15.5.1 The destination Bank shall include details of each transaction that has not been applied in the EFT file exchanged by not later than day 3 of the Clearing Cycle. The records containing details of the unapplied transaction shall follow an unapplied record and shall include all the details on the EFT file of the transaction as originally sent with the Reason for return code.
15.5.2 Reason for Return Codes are detailed in Appendix “C”.
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15.6 Disputed Transactions
15.6.1 Missing and Wrongly Delivered Files
The presenting Processing Centre shall be notified and has 15 minutes within which to provide a good copy of the missing file. If this is not achieved, the contents of the Settlement File are treated as missing and the appropriate Settlement Discrepancy Records generated for exchange at the next opportunity. If the Settlement File from the SAECH is corrupt or unreadable, the SAECH Supervisor shall be notified. The SAECH shall provide a replacement file, or the SAECH Supervisor shall advise all processing Centres of the intended action.
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16.0 UNPAID / UNAPPLIED INSTRUMENTS (CHEQUES)
16.1.1 Paying banks will determine fate and identify items to be returned. The Paying bank shall prepare the Unpaid records which must be appended to the Electronic Data files for the SAECH and sorts the items to be returned by bank. 16.1.2 The Reason for Return Code and Description must be printed or hand written on each cheque, in the correct zone. 16.1.3 When a cheque is returned unpaid to the collecting bank, the drawee bank shall place an "Unpaid" stamp clearly in the designated area. 16.1.4 The returned cheques must be presented in a batch corresponding with records on the Electronic Data files for each bank. 16.1.5 Exchange of returned cheques and exchange of Electronic Data files follow the same steps as described above. 16.1.6 The bank receiving the Unpaids will reconcile the returned cheques against the incoming Electronic Data File; identify any discrepancies, e.g., wrong deliveries, missing or extra items, and post entries to accounts.
16.2 Treatment of unpaid Items
16.2.1 The instruments returned unpaid shall be endorsed at the back with, the reason code identifying why the payment is refused. See Appendix “A”
16.2.1.1 Each instrument shall bear on the face of it and in full, preferably in red ink, the reason for non-payment. 16.2.1.2 If there is more than one reason for dishonoring the instruments, all the reasons must be stated. 16.2.1.3 The instrument should have, on the reverse side, the date stamp of the drawee bank branch indicating the date dishonored/presented for payment. 16.2.1.4 The time limit for the return of all unpaid instruments shall be that provide for at supra.
16.3 Discrepancies
16.3.1 Receiving banks will identify discrepancy items to be reported. 16.3.2 A Discrepancy file must be prepared for the SAECH. 16.3.3 Exchange of discrepancy items and exchange of Discrepancy files follows the same steps as described above.
16.4 Unpaid instruments of E5, 000 and over
16.4.1 The drawee bank must at all times advice the collecting bank directly by SWIFT/Telex/PC Telex /E-Mail of dishonor. This advice shall be known as a "YUFIG" message. 16.4.1.2 Where the advice of “unpaid” is sent via e-mail, the message must be in the prescribed format and shall be sent with a “Read Receipt” function. The “read receipt” requirement shall constitute conformation of delivery. The e-mail shall be sent to a dedicated e-mail address as advised by the paying bank.
The "YUFIG"/SWIFT/TELEX/PC TELEX message shall be as follows: -
(a) "Your remittance cheque for E.............. (b) Bearing your bank stamp dated. /... /... (c) Sent to us on. /... /...
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(d) Included in report/tally total E.............. (e) Serial number of cheque ............... (f) Drawer................ ............... (g) Payee\Last Endorser ............... (h) Is unpaid with answer ...............
16.4.2 Telex/SWIFT/PC Telex expenses in regard to advice of dishonor will be for the account of the dishonoring (drawee) member branch.
16.4.3 "YUFIG" messages must be sent direct to the collecting bank's branch whose bank stamp appears on the face of the instrument being dishonored, unless member banks have advised differently.
16.4.4 Once a "YUFIG" has been dispatched to the collecting bank's branch the drawee branch may not hold the cheque back in anticipation of it being subsequently paid. The instrument shall be returned promptly to the collecting bank.
16.4.5 Proof of having dispatched a "YUFIG" message to the collecting bank in compliance with all requirements, will absolve the drawer bank of all possible claims from the collecting bank.
16.4.6 "YUFIG" messages sent by fax shall only be treated as pre-advice, pending the receipt of the SWIFT/Telex/PC Telex advice or written confirmation to the bank's respective head office on the following day.
16.5 Direct Debit Orders
16.5.1 Direct debits, if unpaid, must be returned within thirty days. Any items disputed by the account holder must be settled directly between banks in accordance with the existing interbank arrangements.
17.0 POSTDATED INSTRUMENTS
17.1 Instruments deposited are to be examined at point of deposit by the collecting bank's branch, which will return all post-dated items to the depositor. 17.2 However, should any post-dated instrument not be detected at point of deposit, then the drawee bank's branch will debit the collecting branch with a handling fee on the charge schedule in respect of that item and will attach a photocopy of both sides of the instrument to the relative debit slip manually cleared to the clearinghouse. 17.3 Such instruments are refused for collection, but not dishonored. It is not necessary that they bear the rubber stamp impression of the returning bank on the reverse. Any stamp inadvertently applied on the face of the cheque must be cancelled. 17.4 Cheques that are presented and subsequently dishonoured are not allowable for representment. There is one exception to this rule relating to Post Dated cheques. This exception is made to allow the payee an opportunity to present the cheque to the collecting bank on the said due date and obtain fate.
18.0 CARRIER ENVELOPES
18.1 Treatment of carrier envelops
18.1.1 Carrier envelopes are used but not limited to the following instruments:
- Unpaid cheques.
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- Spoiled items (ensure remitting bank stamp appears on item)
- Cheques drawn on transferred or closed accounts.
- Wrongly cleared items.
- Unencoded debit items eligible for clearing.
- Mutilated cheques
18.1.2 Instruments placed in carrier envelopes must not be folded and must not have any objects such as pins, gem clips, staples, receipts or any other documents attached thereto. 18.1.3 The following items may be submitted through the SAECH in carrier envelopes:
- Unpaid cheques.
- Spoiled items (ensure remitting bank stamp appears on item)
- Cheques drawn on transferred or closed accounts.
- Wrongly cleared items.
- Unencoded debit items eligible for clearing.
- Mutilated cheques
19.0 MISSING INSTRUMENTS
Missing and Wrongly Delivered Batches of Cheques
Banks shall, on a bilateral basis, immediately resolve problems resulting from:
(a) A missing batch of vouchers (b) A wrongly included batch of vouchers
In all cases the receiving bank shall be responsible for advising the Supervisor of the SAECH in order to enable an assessment of the situation.
19.1 Any claim in respect of a missing instrument shall be submitted in the format which follows this clause, and it is for an amount of E5000 or over should be pre-advised by telex/SWIFT to the collecting branch, thereby putting them on immediate notice that there may be a claim in respect of the lost instrument. 19.2 Claims pre-advised in this manner must be presented in not later than 3 business days, and reference made to the pre-claim advice. Any dispute that may arise must be first directed to the head office of the member bank.
19.3 Claims for Missing Instruments (format) To............ (Name of collecting bank)...(date)
This is to certify that an instrument for E... Drawn on .................(name of branch if known)
presented through the Clearing House on...(date)
And included in your Tally/Report Totaling E...
is missing ....................................................
(insert as much detail as may be available).
We claim immediate re-imbursement through clearing.
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For your records, you will be able to advise us the name of the drawer of the instrument and the Branch at which the instrument is payable. On receipt of this information from you, we will contact our client advising him\her of the loss of the instrument requesting confirmation for payment to you for account of the payee.
.................................................... (AUTHORIZED SIGNATURE)
20.0 BANK STAMPS
20.1 Information required on Bank Stamps
20.1.1 Outward Clearing For outward clearing each item cleared must bear, on the face, a legible bank stamp of the collecting bank.
20.1.2 Inward Clearing For inward clearing each item cleared must bear, on the back, a legible bank stamp of the bank by the receiving bank.
19.1.3 The following information shall appear on the bank stamp:
19.1.3.1 Name of bank and branch (full or abbreviated), as approved by the Central Bank of Swaziland. 19.1.3.2 Date. 19.1.3.3 Department (optional). 19.1.3.4 Teller Number (if possible)
20.2 Bank Stamp Specifications
20.2.1 Maximum/Minimum Bank Stamp Size. Maximum size - 38mm by 38mm square, or 38mm diameter Minimum size - 32mm by 32mm square, or 32mm diameter
20.3 The Placing of Bank Stamps on Instruments.
20.3.1 Bank stamps must be clearly legible and should not obliterate, or obscure technical information or encroach on the “ clear band”:
20.3.1.1 The amount or date of the item. 20.3.1.2 The signature on the item. 20.3.1.3 Any information in the MICR code line.
20.4 Member banks must, within their own disciplines, designate responsibility to ensure that bank stamps in use by their branches are maintained in such a condition as to provide clear and distinct impressions at all times.
20.5 The penalty for defective stamping shall be as provided in Appendix “B”.
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21.0 LIABILITY FOR LOSSES
LIABILITY FOR ANY LOSSES ARISING IN THE EVENT OF A DRAWEE BANK NOT CARRYING OUT THE RULES FOR THE RETURN OF DISHONOURED ITEMS OR FOR THE HANDLING OF LOST ITEMS.
21.1 The purpose of this rule is to determine liability for loss between member banks where instruments have been returned unpaid or advised lost/missing contrary to these rules. 21.2 The guiding principle is that bank customers are not to be relieved of their normal legal liabilities as parties to such paper merely because the drawee bank has failed to carry out all or any of the rules relating to the handling of unpaid or lost/missing items. 21.3 In accordance with this principle, a collecting bank may under the following circumstances protest the return of an unpaid item presented for clearing: - 21.3.1 Where the drawee bank has failed to dispatch such advice as directed in these rules. i.e. "YUFIG". 21.3.2 Where such advises is misdirected. 21.3.3 Where items are returned unpaid and/or messages are dispatched later than the prescribed time limit for returning the item concerned, in terms of these rules. 21.3.4 Where the dishonored instrument is not returned to the collecting bank. 21.3.5 Where debits in respect of lost/missing items are raised against the collecting bank after expiry of the prescribed time limits. 21.3.6 In such cases, the depositor's account with the collecting bank or transferee bank is to be debited on the grounds that the depositor is the principal, and holder, while the collecting bank acts as a handling agent.
21.4 If the collecting bank is unable to debit the depositor's account, for a lawful reason, e.g. where an account has been closed irrespective of the amount, it must debit the item back to the owing bank immediately in terms of these rules i.e. under SWIFT/Telex advice, provided that: -
21.4.1 The collecting bank is in a position to prove that the paying bank’s error is the direct cause of its inability to debit the account of the depositor and the collecting bank has no other means to recover the amount. 21.4.2 Should a debit raised in the foregoing circumstances become the subject of dispute between the bank branches concerned, the drawee bank shall debit the amount to a suspense account in its books, until the dispute is resolved.
21.5 If, however, the potential loss is not a direct result of the paying bank’s error e.g. Item cashed or counter-value or part thereof paid before termination of the prescribed time limit for dishonours by the drawee branch, the collecting bank Shall be obliged to accept the amount cashed or paid as such without any right of protest or recourse against the drawee bank, unless specifically agreed otherwise by the banks concerned.
21.6 Where as a result of such action, debiting the depositor or a suspense account, the collecting bank itself can produce evidence of prejudice, i.e. financial loss, which arises directly from the drawee bank’s error, the collecting bank shall notify the erring bank promptly in terms of the rules that the depositor’s account has been debited to a suspense account under protest, and which protest advice shall read as follows: - "Protest your dishonor (date, amount, drawer and answer) (reason for protest). Prejudice amounts to E...(give reasons). Please provide firm commitment".
21.7 Failure of the collecting bank to dispatch such advice in these terms to the drawee bank’s branch will not make the collecting bank responsible for any loss arising from the drawee bank’s non-compliance with the rules for handling unpaid or lost items. 21.8 A response to a protest advice shall read as follows: -
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"Your protest of (date) our dishonor (date, amount and drawer). We confirm Commitment subject to your proving prejudice to a maximum of E... (Amount of the cheque). 21.9 If the collecting bank’s branch does not receive a firm commitment in terms of these rules within seven days, it will be entitled to return the item to the erring bank under telex advice.
22.0 LIMIT OF LIABILITY
22.1 The Swaziland Automated Electronic Clearing House shall not in any way be responsible or liable in the event that a member incurs a loss in connection with the operation of the SAECH, except in the event of the SAECH own negligence or misconduct. 22.2 All claims on account of wrong sorting, the return of items, failure to return items, default by a member, and the like, shall be adjusted among the members directly involved. The SAECH / member shall, however, be accountable pursuant to the terms of these rules for its own items, if any, in the same manner as any other member.
23.0 DISPUTE RESOLUTION
23.1 Should any query arise in connection with the observance of these rules between members such query shall be referred to and handled in terms of the following procedure: 23.1.1 The querying member shall in the first instance require in writing, the member concerned, to address and settle the query immediately. 23.1.2 All disputes in the above regard are to be dealt with by banks’ branches at Managerial level. 23.1.3 Matters, which cannot be settled amicably, should be promptly referred and addressed in writing, to the respective bank’s Head Office for the attention of the CEO or MD. 23.1.4 If no settlement is reached between the members the matter shall then be reported to the chairman of the Governing Body for arbitration by the latter, and whose decision shall be final.
24.0 GENERAL PROVISIONS
24.1 Nothing in these rules entitles a drawee bank automatically to return an instrument after the expiry of the time limit for dishonor and return 24.2 Drawee branches shall contact their administrative office for guidance in all cases where instruments have been inadvertently paid. 24.3 The only circumstances in which a drawee bank may dishonor an instrument after it has been inadvertently paid are where in the determination of the drawee and collecting banks, who must be in agreement on the point, there is a link based on fraud between the account conducted by both banks and the collecting bank still holds funds sufficient to absorb the instrument being dishonored late.
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25.0 GOVERNING LAW
The transactions covered by these rules shall be subject in all respects to the “Law of Swaziland”.
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APPENDIX A
TRANSACTION CODES
Transaction Codes currently decided upon between the banks in Swaziland.
| Outward Code | SFI Code | Inward Code | Description | Additional Comments |
|---|---|---|---|---|
| Blank | No code present will always indicate a cheque that is to be returned to the account holding bank | |||
| 00 | ||||
| 01-39 | Debit Pull Transactions (Paper Based) | Reserved for Printers ID Code | ||
| 01 | 01 | 01 | Cheques - Standard Bank | |
| 02 | 01 | 01 | Cheques - FNB /Standard Bank /Central Bank | |
| 03 | 01 | 01 | Cheques - FNB /Central Bank | |
| 04 | 01 | 01 | Cheques - Nedbank | |
| 05 | 01 | 01 | Cheques - | |
| 06 | 01 | 01 | Cheques - Standard Bank | |
| 07 | 01 | 01 | Cheques - | |
| 08 | 01 | 01 | Cheques - Central Bank (government) | |
| 09 | 01 | 01 | Cheques - | |
| 10 | 01 | 01 | Cheques - | |
| 11 | 01 | 01 | Cheques - | |
| 12 | 01 | 01 | Cheques - | |
| 13 | 01 | 01 | Cheques - | |
| 14 | 01 | 01 | Cheques - | |
| 15 | 01 | 01 | Cheques - | |
| 16 | 01 | 01 | Cheques - | |
| 17 | 01 | 01 | Cheques - | |
| 18 | 01 | 01 | Cheques - | |
| 19 | 01 | 01 | Cheques - SwaziBank | |
| 20 | 01 | 01 | Cheques - | |
| 21 | 01 | 01 | Cheques - | |
| 22 | 01 | 01 | Cheques - | |
| 23 | 01 | 01 | Cheques - | |
| 24 | 01 | 01 | Cheques - | |
| 25 | 01 | 01 | Cheques - | |
| 26 | 01 | 01 | Cheques - | |
| 27 | 01 | 01 | Cheques - Central Bank (government) | |
| 28 | 01 | 01 | Cheques - | |
| 29 | 29 | 29 | Clearance Vouchers (CV's) | |
| 30 | 30 | 30 | Unpaid Items (Bank Charges) | |
| 31 | 31 | 31 | Redirected | |
| 32 | 32 | 32 | Sundry Debits | |
| 33 | 33 | 33 | Unpaid Items (Bank Charges) | |
| 34 | 34 | 34 | Direct Debit / Debit orders (Originating from Customers) | Insurance etc |
| 35 | 35 | 35 | Government withholding Tax | |
| 36 | 36 | 36 | HP / Leasing | Wesbank/ Stannic |
| 37 | 37 | 37 | Commission / Charges | |
| 38 | 38 | 38 | Interest | |
| 39 | 39 | 39 | Correction | |
| 40-49 | Debit EFT's (Paperless) | |||
| 40 | 40 | 40 | Direct debit / Debit Orders | |
| 41 | 41 | 41 | Charge Internet | |
| 42 | 42 | 42 | Charge ATM | |
| 43 | 43 | 43 | ATM Debit | |
| 44 | 44 | 44 | Correction Clearing Settlement | |
| 45 | ||||
| 46 | ||||
| 47 | 47 | 47 | Masc. Debit |
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Daily settlements – means, completion of settlement on the day of value of all payments accepted for settlement. Day of value - means day on which a payment is due to be credited to the receiving participant in the payment system. The day of value for the receiving participant's customer (that is, the day on which the receiving participant credits the customer in its books) may or may not be the same day, depending on the specific arrangements or local practice. Direct participant - means a participant in an Inter-bank Funds Transfer System (IFTS) who is responsible to the settlement agent (or to all other direct participants) for the settlement of its own payments, those of its customers, and those of the indirect participants on whose behalf it is settling. Finality of payment - takes place when a customer has been given advice of payment finality after settlement has taken place. Final payment is irreversible, irrevocable and unconditional payment. Final settlement - means a settlement that is irrevocable and unconditional. Instrument - means a document of title for effecting payment. Legal ownership - means the recognition in law of ownership of a security or a financial instrument. It is usually represented by holding “legal title” and sometimes distinguished from beneficial ownership/interest. Legal title - means one recognizable or enforceable in law or one, which is complete and perfect as regards the apparent right of ownership, and possession, which may carry no beneficial interest. Loss Sharing Arrangements: Payment System Risks mitigating measures agreed upon by members of a clearing house or a transfer system which involve a bale-out mechanism or allocation of any loss arising when one or more participants fail to fulfill their obligation. They include “Defaulter Pays Mechanisms” which involve the use of the defaulter’s collateral to settle the deficit position, and the “Survivors” Pay Arrangement, which means the surviving members assume the loss based on agreed formula. MICR – means Magnetic Ink Character Recognition. Magnetic Ink Character Recognition – means a technique, using special MICR machine-readable characters, by which documents (i.e. cheques, credit transfers, direct debits) are automatically read by machines for electronic processing. Multilateral Net Settlement Position - means the sum of the value of all the transfers a participant in a net settlement system has received during a certain period of time less the value of the transfers made by the participant to all other participants. If the sum is positive, the participant is in a multilateral net credit position; if the sum is negative, the participant is in a multilateral net debit position. Multilateral Net Settlement System - means a settlement system in which each settling participant settles the multilateral net settlement position which results from the transfers made and received by it, for its own account and on behalf of its customers or non-settling participants for which it is acting. Multilateral netting - means netting on a multilateral basis is arithmetically achieved by summing each participant’s bilateral net positions with the other participants to arrive at a multilateral position. Such netting is conducted through a central counter party (such as a clearinghouse) that is legally substituted as the buyer to every seller and the seller to every buyer. The multilateral position represents the bilateral net position between each participant and the central counter party. Multilateral netting - an arrangement among three or more parties to net their obligations. The obligations covered by the arrangement may arise from, financial contracts, payment transfers or both. The multilateral netting of payment obligations normally takes place in the context of a multilateral net settlements system. Net Settlement - means the settlement of a number of obligations or transfers between or among counter parties on a net basis. Net Settlement System - means funds transfer system whose settlement operations are completed on a bilateral or multilateral position.
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Netting - means an agreed offsetting of positions or obligations by trading partners or participants. The netting reduces a large number of individual positions or obligations to a smaller number of obligations or positions. Netting may take several forms, which have varying degrees of legal enforceability in the event of default of one of the parties. Obligation - means, a duty imposed by contract or law. It is also used to describe a security or other financial instrument, such as a bond or promissory note, which contains the issuers undertaking to pay the owner. Online - means in the context of payment and settlement systems, this term may refer to the transmission of transfer instructions by users, through such electronic means as computer-to-computer interfaces or electronic terminals, that are entered into a transfer processing system by automated means. The term may also refer to the storage of data by a transfer processing system on a computer database such that the user has direct access to the data (frequently in real time) through input/output devices such as terminals. Participant/Member - means a party who participates in the transfer system. This generic term refers to an institution, which is identified by a transfer system (e.g. by a bank identification number) and is allowed to send payment orders directly to the system or which is directly bound by the rules governing the transfer system. Paying agent/bank - means an institution that, acting on behalf of an issuer, makes payments to holders of securities (e.g. payments of interest or principal). Payment - means the payer’s transfer of a monetary claim on a party acceptable to the payee. Typically, claims take the form of bank notes or deposit balances held at a financial institution or at a central bank. Payment Instrument - means any instrument enabling the holder/user to transfer funds. Payment Message / Instruction - means an order or message to transfer funds (in the form of a monetary claim on a party) to the order of the beneficiary. The order may relate either to a credit transfer or to a debit transfer. Payment system - means a payment system that consists of a set of instruments, banking procedures and, typically, inter-bank funds transfer systems that ensure the circulation of money. SWIFT - means Society for Worldwide Inter-bank Financial Telecommunication: a cooperative organization created and owned by banks that operates a network which facilitates the exchange of payment and other financial messages between financial institutions (including broker-dealers and securities companies) throughout the world. A SWIFT payment message is an instruction to transfer funds; the exchange of funds (settlement) subsequently takes place over a payment system or through correspondent banking relationships. Settlement - means an act that discharges obligations in respect of funds or securities transfers between two or more parties. Settlement Bank - means either a central bank or a private bank used to effect money settlements. The entity that maintains cash accounts used to settle payment obligations associated with securities transactions. The settlement bank may be a commercial bank, the settlement system itself or a central bank. Settlement Obligation - means an amount due from a financial institution to other financial institutions as a result of the clearing payments. Settlement Risk - means the risk that a party will default on or more settlement obligations to its counter parties or to a settlement agent. Settlement Risk - general term used to designate the risk that settlement in a transfer system will not take place as expected. This risk may comprise both credit and liquidity risk. Settlement System - means a system used to facilitate the settlement of transfers of funds or financial instruments. Settlement System - means a system in which settlement takes place. Settlement Systems are basically of two types, namely designated-time (deferred) net settlement, and real-time (or continuous) gross settlement. The distinction lies basically on the methods in which settlement takes place and the timing/ frequency of settlement. Supervision of financial institutions - means the assessment and enforcement of compliance by financial institutions with laws, regulations or other rules intended to ensure that they operate in
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a safe and sound manner and that they hold capital and reserves sufficient to support the risks that arise in their business. Systemic Risk - means the risk that the failure of one participant in a transfer system or in financial markets to meet its required obligation will cause other participants or financial institutions to be unable to meet their obligations. Transfer - means operationally, the sending (or movement) of funds or securities or of a right relating to funds or securities from one party to another party by (i) conveyance of physical instruments/money;(ii) accounting entries on the books of a financial intermediary; or (iii) accounting entries processed through a funds and/or securities transfer system. The act of transfer affects the legal rights of the transferor, transferee, and possibly third parties in relation to the money balance, security or other financial instrument being transferred.
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APPENDIX C
Reasons to dishonor payment instructions
Reason for Return Codes
Reserved Codes
| CODE | INTERPRETATION |
|---|---|
| 00 –29 | Processing and Record type (see below) |
| 30 | Unpaid/unapplied due to suspected criminal activity |
| 31 – 79 | Unpaid/unapplied |
| 80 – 89 | Reserved for future use |
| 90 – 99 | Reserved for Intra-bank use |
Processing and Record Types
| CODE | INTERPRETATION |
|---|---|
| 00 | Transaction being Presented |
| 01 | Reserved for future use |
| 02 | Missing – matched |
| 03 | Free - matched |
| 04 | Missing – unmatched |
| 05 | Free – unmatched |
| 06 | Cheques Settlement Record – Automated Clearing |
| 07 | Electronic Funds Transfer – Debit Settlement Record |
| 08 | Electronic Funds Transfer – Credits Settlement Record |
| 09 | Cheques Settlement Record – Manual Clearing |
| 10 | Wrongly Delivered |
| 11 | Document Mutilated because of staples, pins, clips etc |
| 12 | Mutilated Cheque |
| 13 | Mutilated Cheque requires bank’s confirmation |
| 14 | Cheque previously advised as missing – returned Unpaid |
| 15 | Cheque previously advised as missing – found at Clearing Centre |
| 16 | Control Voucher Record |
| 17 | Reserved for future use |
| 18 | Header Record |
| 19 | Trailer Record |
| 20 | Reserved for future use |
| 21 | Cheque Defaced |
| 22 | Unapplied and Unpaid Electronic Funds Transfer Record |
| 23 –29 | Reserved for future use |
| 30 | Cheque Unpaid and retained because of suspected Criminal Activity. |
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Unpaid/Unapplied
| CODE | INTERPRETATION |
|---|---|
| 31 | Date expired - Cheque stale |
| 32 | Post-dated |
| 33 | Date Irregular |